Nvidia stock drops after US government restricts chip sales to China

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Nvidia headquarters in Santa Clara, California, on Tuesday, February 23, 2021.

David Paul Morris | Bloomberg | Getty Images

Nvidia shares fell 6.5% during extended trading on Wednesday after the company said the US government is restricting sales in China.

In a filing with the SEC, Nvidia said the U.S. government told the company on Aug. 26 about a new licensing requirement for future exports to China, including Hong Kong, to reduce the risk of the products being used by the Chinese military.

Nvidia said the restriction would affect its A100 and H100 products, graphics processing units sold to businesses.

“The license requirement also includes all future Nvidia integrated circuits that achieve both peak performance and chip-to-chip I/O performance equal to or exceed thresholds approximately equal to the A100, as well as any system containing these circuits. ,” the statement said.

The company expects it could lose $400 million in potential sales in China in the current quarter, after previously forecasting revenue of $5.9 billion. The new rule also applies to sales to Russia, but Nvidia said it doesn’t have paying customers there.

In recent years, the US government has increasingly imposed export restrictions on chips made with US technology, fearing Chinese companies could use them for military purposes or steal trade secrets.

Nvidia said it is applying for a license to continue some of China’s exports, but doesn’t know if the US government will grant an exemption.

“We’re working with our customers in China to satisfy their planned or future purchases with alternative products and can source licenses where replacements aren’t enough,” an Nvidia spokesperson told CNBC. “The only current products to which the new licensing requirement applies are A100, H100 and systems such as DGX that contain them.”

An AMD representative confirmed to CNBC that it had also received new licensing requirements from the U.S. Department of Commerce that it said applied to its MI250 circuit, which is intended for artificial intelligence. AMD said it did not believe the new requirements would have a material impact on its operations.

In a statement to CNBC, a spokesperson for the department said: “While we are unable to outline specific policy changes at this time, we are taking a comprehensive approach to implement additional actions needed with regard to technologies, end-use and end-users. to protect national security and US foreign policy interests.”

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